Why is it so damned hard to bean investor with a conscience?

DON’T be evil was Google’s unofficial motto until spring this year.

Yet the firm pries on users’ data to sell tightly targeted advertising and, in July, it was fined €4.34 billion (£3.86 billion) by the European Commission for abusing its market dominance.

Ethics is a difficult concept in the world of business. Occasionally, I’ve considered rearranging my investments to avoid those whose practices I despise.

Tobacco and gambling top my list. I’m also a bit of a ‘green’, as you probably guessed if you’ve read about my solar panels.

I have concentrated on the financial gains, but how else do I get a piece on green energy past the watchful eyes of the Money Mail editor? But when we choose investment funds, rather than individual shares, exclusion can be fiendishly difficult.

The likes of British American Tobacco (BAT), Philip Morris International, another tobacco company, and gambling firms Ladbrokes, William Hill and Paddy Power are lurking in most successful funds. Kicking out tobacco would mean knocking most income funds on the head.

I did very well in the early 2000s with Invesco Perpetual Income, then managed by Neil Woodford, but I have already sold these and Woodford’s current income fund.

Those still sucked in by tobacco should note the outlook isn’t good as vaping steals the market.

Traditionally, ethical investing meant a small world of funds with erratic performance.

However, the ethically based FTSE4Good Index, with a 137 pc return over ten years, has almost matched the FTSE All Share.

The U. S. FTSE4Good has returned 353 pc over ten years, compared with 323 pc for the S&P 500 Index.

I can see little argument for excluding all oil or mining firms. Most of us drive, we need to heat our homes and Mrs H is partial to the odd gemstone. Others would disagree.

I would prefer my investments targeted towards companies with good employment practices and environmental records, though.

Adrian Lowcock, Willis Owen’s head of personal investing, ran me through some approaches.

You can screen out companies that are seen as unethical or not environmentally friendly.

There’s responsible or sustainable investing, which looks at environmental, social and governance factors (so-called ESG). This looks at how companies behave.

Then there is impact investing, which means positive screening for firms you feel are doing the right things.

So, how difficult is it now to invest ethically? Well, Royal London runs a UK FTSE4Good fund. But it is expensive for a tracker, with a 1.5 pc annual charge — and it’s not readily available on most investment platforms. Performance is also quite weak over five years, at 33.6 pc growth. But it was better over ten years, at 101.4 pc, according to Thomson Reuters Lipper.

Legal & General Ethical takes the 350 biggest UK companies, then excludes those involved in water pollution, intensive farming, gambling, pornography, weapons manufacturing or tobacco sales.

It charges 0.69 pc — or less on some platforms. Over five years, it has returned 38.1 pc and, over ten years, 151.9 pc.

To compare, L&G’s normal UK Index fund can boast 39.8 pc over five years and 130 pc over ten.

BlackRock offers iShares — basically funds that trade on a stock exchange — which track ethical and sustainable indices.

One firm that’s put considerable effort into checking out environmental, social and governance factors is Hermes Investment Management. Lewis Grant, global equities senior portfolio manager, says: ‘We believe our responsibilities as investors do not stop with a decision to buy or sell a stock.

‘We must act as engaged owners of the companies in which we are invested and the assets that we manage. This means engaging in constructive dialogue and taking action through our ownership rights.’ Its Impact Opportunities fund is up 14 pc since launching last December.

Mr Lowcock mentions two funds. For the cautious, Kames Ethical Cautious Managed applies a strict ethical filter that excludes mining and energy stocks, tobacco and banks with investment operations. ‘The fund tends to have a bias towards mid and smaller companies, as well as favouring cyclical stocks,’ he says. Returns reflect the caution — with 30.3 pc over five years, but 116 pc over ten.

For a global view, Stewart Investors Worldwide Sustainability Fund will, says Mr Lowcock, ‘take account of sustainability themes and issues and requires positive engagement with companies in respect of these’. It has returned 78 pc in five years.

Foreign & Colonial runs a range called Responsible funds. Its Responsible Global Equity has roughly doubled investors’ money in five years. The average global unit trust has returned 65 pc over five years.

So, where does this leave me? Like many, I would love to invest more ethically. But I still feel there is a lack of choice. From now on, I plan to avoid putting new money into funds that are heavily investing in tobacco or gambling.

But the fundamental question for the investment industry, whether they be running actively managed funds or trackers, is this: why do you make it so damned hard for us to be good?